SEC Operations:

Increased Workload Creates Challenges

GAO-02-302: Published: Mar 5, 2002. Publicly Released: Mar 5, 2002.

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The Securities and Exchange Commission (SEC) faces growing regulatory and oversight challenges. Technological advances have increased the complexity of securities markets and the range of products offered to the public. More people than ever are invested in securities, either directly or through mutual funds. Technology has also fundamentally changed the way these markets operate and how investors interact with them. SEC routinely prioritizes and allocates resources, but the agency is under increasing pressure because of the staffing imbalances caused by its growing workload. Staffing shortages have delayed critical regulatory activities, such as reviewing rule findings and issuing guidance. Oversight and supervisory functions have also been affected. SEC has tried to address its high turnover by offering special pay rates and retention bonuses, but the lack of funding for pay parity means little relief in the short-term. SEC has generally managed the gap between staff and workload by determining which basic duties mandated by statute could be accomplished with existing resources. This approach has forced SEC to be largely reactive rather than proactive.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: SEC's average turnover rate decreased from 15% in FY2000 to 7.5% in FY2005. SEC's goal is to keep this rate at or below 7%. SEC was able to reduce the turnover rate through a combination of congressional and agency actions. First, pay parity legislation adopted in FY2002 allowed SEC to begin offering salary and benefit packages to its employees that are competitive with those of other federal financial regulators. In 2003, the President and Congress approved significant funding and staffing increases in addition to authority to expedite the hiring of accountants, examiners and attorneys that allowed SEC to hire hundreds of new employees to help address the challenges facing the securities industry. These new resources also allowed SEC to begin implementing a multi-year strategy to enhance its information technology systems. Furthermore, in 2005, SEC completed a major hiring initiative--retaining two executive recruiting firms to help fill "hard-to-fill" accounting positions in the Division of Corporation Finance and developed a new hiring program targeting MBA graduates. SEC also continued to develop several important programs to retain its employees, including its new Pay-for-Performance system, pay and benefit revisions, virtual workforce capability, and the implementation of integrated human capital systems.

    Recommendation: The chairman, SEC, should develop short-term and long-term strategies to address the challenges SEC faces. In the short-term, SEC should take definitive steps to continue to address its turnover problem and fill its vacant positions. These actions should include exploring use of its no-year fund to expand recruiting and retention efforts to ensure that all available resources are maximized to attract and retain staff. Likewise, SEC should explore innovative ways to attract senior level staff and bring in additional information technology expertise to better position itself to oversee evolving securities markets.

    Agency Affected: United States Securities and Exchange Commission

  2. Status: Closed - Implemented

    Comments: In 2002 SEC completed an internal review of its operations, which included staff from across the agency. This effort provides an important first step in developing a more comprehensive strategic plan and should aid in its human capital planning process. SEC has also implemented a new par structure aimed at addressing the pay disparity between it and other financial regulators. Since our report, SEC has also taken steps to address many of its human capital practices. SEC has also received the authority to change the way it hires accountants and examiners.

    Recommendation: In the long-term, the chairman, SEC, should address several issues relating to strategic planning by broadening SEC's strategic planning process to systematically determine regulatory priorities and resource levels needed to fulfill its mission. Furthermore, once SEC has completed the strategic planning process, each division and office should accurately identify the skills needed to perform the regulatory priorities identified. Once this is completed, SEC should link the strategic plan to staffing allocations and workforce determinations and expand its existing recruiting effort to include any additional disciplines identified as necessary to effectively regulate evolving securities markets.

    Agency Affected: United States Securities and Exchange Commission

 

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